Andrew Lilico

Andrew Lilico is an Economist with Europe Economics, and a member of the Shadow Monetary Policy Committee

Should Muslim or other women be banned from wearing veils?

First, let's be clear what this question is not about. It's not about whether Muslim women should wear veils in courtrooms or at airport security or passport control or whilst running dangerous machinery that requires peripheral vision or any or special situation in which there would be restrictions on anyone else's headwear. You can't wear hoodies in those situations, either, and in most of them you can't wear hats. But if someone asked: "Should men be banned from wearing hats" you wouldn't think the correct answer is "Yes - they shouldn't wear hats when going through passport control."

No. The question of whether Muslim women should be banned from wearing veils is the question of whether, in ordinary social situations - when walking in the street, or at work, or in classrooms - they should be permitted to wear veils. I say: yes, if they want to.

The UK economic data released over the summer have been extremely strong. The most closely-watched survey numbers suggest that the construction sector is growing at its fastest since the spike of 2007, manufacturing output at its fastest since 1994, the services sector index at its higest level since late 2006. The overall "composite" combination of these data is the strongest on record. The last time manufacturing output was growing as strongly as this, UK GDP was growing at four and a half percent per annum.

UK GDP, which grew at 0.7% in the second quarter of 2013 (on a broad basis including investment growth not just household consumption), now appears likely to grow at above 1% in Q3. In the detail of the survey data, business investment and orders for intermediate goods were particularly strong, indicating that investment may accelerate further.

This improving growth outlook has been achieved so far without any material expansion in bank lending. In my view, we should expect more rapid growth in bank lending to follow on from recovery. With just a little normalisation in output, from the extended deep recession and slow recovery so far, bank balance sheets should be expected suddenly to look much stronger as the risk of businesses and households defaulting on their debts fades with improving economic prospects - especially if banks anticipate that interest rates will stay low for an extended period, as the Bank of England has attempted to promise via its new "forward guidance" (wherein it has effectively indicated it does not intend to raise rates from their current 0.5% until late 2016).

If we add in accelerating lending growth to an already-rapidly-growing picture, GDP growth similar to that in 1994 (some four and a half percent that year) would become less laughable than it would have seemed nine months ago.

We should expect George Osborne and the government in general to take a political dividend from this (at least until the inflation arises, which will happen for the reasons I have explored many times before and will not repeat here). He will claim he held his nerve and stuck to his plan when all around him others predicted disaster if he did not change course. He will say that Labour first said his economic plan would plunge the economy into further deep recession (which it did not) and then switched to claiming it would mire the economy in perma-slump (which it did not) and that Labour's understanding of how the economy works is therefore demonstrably flawed and its economic judgements should not be relied upon.

And, for a while at least, the public will listen. The public will say: "Labour knows how to squander money in the good times and eventually horlicks up the economy but, say what you like about how heartless or out of touch the Conservatives are, at the end of the day they know how to sort out Labour's messes."

Labour's narrative is in terrible trouble. It wasted three years attacking the macroeconomic consequences of spending cuts when it should have focused upon the cost of living and upon challenging the government's priorities for spending cuts. It has finally discovered the cost of living, but because it has switched to that line so late, even that will now give it a problem. For Labour, the "cost of living" seems to be code for "wages should rise", not "taxes are too high". But wages outside the public sector grew slower than inflation for years before the Coalition came in. And what is Labour going to say now if wages do start accelerating? Will it welcome that, even if a spurt in wage growth is associated with rising inflation?

If inflation comes in on Osborne's watch, he will suffer politically for that. But Labour's credibility may be so damaged by that point that it is not Labour that gains even as Osborne loses. Will the public really say: "There are some touch decisions to take to get inflation down, some of which may be very unpopular and even mean slow growth or recession in the short term. Who shall we send for when a tough call needs to be made? I know! Ed Miliband!"?

All is far from well with the British economy. I expect a fully-fledged old-fashioned inflationary boom-bust cycle, including inflation at levels many of us had forgetten were possible and mass unemployment to follow. But that is all two, three, maybe five years away. For now, and (barring some further international economic disaster so severe it derails events here, as the Eurozone did in 2011) for the next eighteen months to two years, George Osborne will take his well-earned plaudits. Who knows? Perhaps by the end even the "next leader?" whispers may return...?

Many Conservatives opposed William Hague's Syria policy. I supported him. Some Conservatives and many non-Conservatives have condemned his presentation of the government's case and his handling of the vote as incompetent. Doubtless everyone can learn some lessons from that, but I do not consider any mistakes he made over that remotely close to a resigning matter.

Nonetheless, he should still resign. There are two reasons why:

Every Parliamentary vote on military action must be a confidence matter for the sponsoring minister

Every request by a minister for Parliamentary approval for killing people must be a resigning matter for the minister concerned

As I've written before, I'd have preferred it if, some time ago, we had positively eschewed any involvement in the Syrian civil war. I don't see any good guys for us to side with, and up to now I've seen no appetite for us to stay and clean up after attacking nor any national interest.

But the use of chemical weapons by Assad's regime may have changed that.

I'm very suspicious of the claims that the Assad regime has indeed used chemical weapons, for doing so seems irrational to the point of incomprehensibility. So...Assad didn't use chemical weapons against the rebels when he was losing to them, but now that he's winning he's decided to launch chemical rocket strikes against civilians?? I can make no sense of that claim. And of course the record of our intelligence services, in recent years, in identifying WMD issues in the Middle East has been weak.

But at the end of the day, I see no choice but to proceed by trusting the British and American governments on the point. If we refuse to believe them now, where does that leave us? Did men really land on the moon? Is there really any risk of global warming? Are those vaccines they inject us with really to make us well rather than sick? We would abandon our political discourse to the realm of the internet conspiracy theorist. Psychologically, I don't actually trust that the US and UK governments really 99.9% know that Assad attacked his people with chemical weapons, but practically and politically I see no choice but to proceed by entrusting myself to them on this point.

In recent months, when debating issues such as the outside interests of MPs or whether there should be a register of lobbyists, I have repeatedly come across a particular wrong idea, that I think is very widespread. The idea is this: that MPs are employed by voters to listen to the concerns of those voters.

So, for example, there is thought to be the following problem with professional lobbying: lobbyists are paid to gain the ear of MPs so they listen to the particular concerns of the lobbyists' clients, rather than of the voters that employ them. That's just wrong, and it's both straightforward and important to see why.

I have written previously that I believe the key question for the UK with reference to the EU is not "Should we leave or not?" - regardless of the benefits the arrangement has provided to us so far, we will shortly have no realistic option but to leave. Neither is it "After we leave, should we have a Swiss-type, a Norwegian-type, or a Turkish-type agreement with the EU?" - obviously there will be some kind of trade agreement struck with our former EU partners, but that won't even make page 5 of the newspapers (just as when we make new trade agreements with India or South Africa, that doesn't make the front pages, either).

No, the key question isn't about our relationship with the EU at all. It's about what we should do instead. I've previously reviewed a number of the options and argued that the most plausible deep relationship post-EU would be with Canada and Australia, to which we can add New Zealand. Such a combination is often referred to by the acronym "CANZUK".

When I have raised this notion in the past, I find that many folk in the UK think it has a certain romantic attraction, but they worry on two points. First, they assume that the Canadians and Australians and New Zealanders would feel too betrayed by the UK's having deserted old alliances for the EEC in the first place, and are emotionally now much more committed to the US (in Canada's case) or China (in Australia's case) to be interested in re-heating old arrangements. I'll deal that that question another time. Second, they assume that, whatever its cultural attractions, a CANZUK Federation would be too small to be economically or geopolitically attractive to the participants. That is the issue I wish to engage with here.

Discussion of “markets” typically combines a discussion of what I think of as "markets" - a mechanism of exchange of goods and services - and "capitalism" - a system of raising capital to fund projects wherein the providers of capital are distinct from the managers of business. When we critique "markets" we should understand whether we are critiquing the mechanism of exchange or the system of capital-raising.

Focusing upon the mechanism of exchange, it is important to recognise that markets are not any kind of state of nature, not “the law of the jungle”. Instead, they are a deliberate creation of policy, built over centuries of the establishment of property rights, contract rights, and a medium of exchange. Markets are also reliant, for their efficacy, upon the respect for moral norms - especially property, truth-telling, promise-keeping, and fair dealing.

A market can be seen as a tool, like a knife. A knife can be used for moral or immoral purposes - e.g. we could cut dinner or stab those we'd like to rob. If we could not be confident that most users of knives would accept moral constraint upon their use - i.e. that they wouldn't use knives for stabbing people - then allowing people to have knives would not be practically or morally attractive. In the same way, the market mechanism grants us a freedom that we can abuse - we can try to cheat and lie and steal and break our promises, getting away with the most that the law cannot practically intervene to prevent. It is precisely for this reason that markets depend, for their efficacy, upon morality.

It is particularly helpful to distinguish between the market as a morally neutral mechanism and the moral context in which the market operates when we find the operation of a market does not produce an outcome we desire. We want to be able to ask: Does it fail because the mechanism malfunctioned; does it fail because the mechanism is inappropriate for the purpose; or does it fail because the moral norms that guided its use were flawed or absent?

There is no genuine necessary tension between morally significant institutions and markets. The allocation of meat and vegetables to children at the family dinner table is not done via trade, but by Mother or Father's central planning. Similarly, at the village fete the tent will be put up by a team that has tasks allocated, not traded for. Indeed, orthodox economic theory assumes a key role for central planning in one of its most important institutions - namely a "business". In a business, once the initial stock of resources (e.g. the workers and raw materials) are determined by market processes, tasks are allocated (centrally planned) by managers. One great attraction of markets is that they can function partially, in combination with other institutions. By contrast, if society as a whole is to be centrally planned (if central planning is to be the centrepiece of the economic order), then central planning must be more-or-less comprehensive to be useful. It is central planning of society that crowds out other morally significant institutions, not markets.

As well as depending upon certain moral norms to function at all, markets and capitalism encourage morally admirable behaviours and facilitate morally admirable social outcomes. They

encourage innovation, imagination and creativity (through the rewards of success)

facilitate social mobility (the promotion of social mobility is the very purpose of capitalism - the point of capitalism is that it allows those with good ideas or willingness to work hard to obtain capital to fund their projects, even if they have none of their own to start with)

encourage efficiency and oppose stagnation and vested power (through the pressures of competition)

encourage hard work and thrift, offering leisure and plenty as rewards

are environmentally friendly (by using resources efficiently)

allow a society of great diversity and tolerance (because the moral norms required for markets to function are narrow, and because by contrast with planning there is no need for moral choices to be made as to whose projects should flourish and whose die)

are the enemies of misguided prejudice (if you think women are less effective workers than they are, and hence you refuse to hire women, your business will not succeed as well as your competitors' that do hire women)

Markets also provide helpful and timely warnings. That includes the widely-recognised impacts of pricing and profit signals (if making washing soap is not profitable, the market signal is "Do something else.") but also speculation. For, despite the common populist caricaturing of the evils of "speculation", speculators are key agents of economic good. Speculators spotted, before governments realised it themselves, that Greece could not repay its debts. The same thing happens all the time with speculators who understand, often before incompetent company managers have comprehended it, and certainly before they admit it, that companies are in trouble. By observing the pricing consequences of speculation in financial markets, we can see what speculators believe are the risks. If we forbad speculation we would have to wait until the company actually failed before seeing that it was at risk, meaning companies would fail precipitately and unnecessarily, when earlier action in response to signals from speculators, could have turned things around.

The key failure of recent years, leading up to the financial crisis, did not lie in the functioning of markets. It was not over-reliance upon market mechanisms or a misguided idea that all markets are the same. Neither did it lie in failing to add a sufficient "promoting the broader social good, as opposed to individual gain" dimension to the regulation of markets. The key failures, in my view, related to our forgetting the moral underpinnings of capitalism. Specifically, we forget the moral constraints upon usury - lending money at interest. The lesser one forgotten was this: to induce someone to make a promise they will break is to induce (and thus yourself commit) a sin. If you lend money to someone that cannot repay, you make that person make promise (to repay the loan) she will not keep. That is wrong.

That was a problem, and in the US may have been a significant problem with certain subprime lending. But the bigger principle forgotten was this: the moral justification for the receipt of interest is that money lent is at risk of loss, and it is not the job of the state to keep the rich lender rich. Bank deposits are not a mechanism for rentiers to receive riskless passive income. Bank depositors are paid interest because bank deposits are loans.

As a society, we forgot this. Worse than that, we applied market principles to some industries and regions of the country (mining, steel-working, ship-building, the North, Scotland) that we later refused to apply to other industries and regions (banking, the South). Closing the mines had systemic consequences for entire regions, but it was right to subject them to market forces nonetheless. Seeing bank bondholders and depositors lose money when banks went bust may also have had systemic consequences. It was wrong to refuse to see those consequences played out in banking, when we had been content to see them played out in other industries.

Markets and capitalism are tools/systems/mechanism. They depend, for their social efficacy, upon moral norms in their daily operation, and upon moral restraint by policymakers in intervening in markets. We need to learn lessons about morality and markets. But they need to be the right ones.

If a retailer like Woolworths goes bust and the company is
liquidated, there has, since the Bankruptcy Act of 1542 been a
hierarchy of claims on the fruits of liquidating that comany's
assets. These days the order is as follows. First the
"secured" creditors (e.g. those that had lent money secured against a
particular sort of machinery or a car) take their cut, then salaries, the
the creditors termed "senior unsecured" come next, then "junior
unsecured" creditors, and whatever is left over (if anything) goes to the
shareholders. At any point in the hiearchy, you have no claim until more
senior claims have been satisfied in full, and if you take a haircut everyone
that ranks equal with you takes the same haircut.

In a number of countries in the past, if a bank went bust,
depositors ranked ahead of (were "senior to") bondholders. So no
depositor would lose anything until bondholders had been completely wiped
out. But in Britain, as of 2008, legally depositors and bondholders ranked
equally. One of the recommendations of the Vickers Commission was that
depositors should have what is called "preference" over bondholders -
i.e. that in future they should be senior to bondholders, as in certain
other countries. This concept has been taken up at EU level, and is
currently under debate.

One sticking point in negotiations over depositor preference
concerns the status of insured depositors. The British, represented
by Chancellor George Osborne in recent negotiations on this
point, wanted insured depositors to rank ahead of uninsured
depositors. A number of other European leaders wanted insured and uninsured
depositors to rank equally. In my view the British position is wrong, and
that of other EU leaders correct.

To see why, let us consider two cases: the treatment of
depositors in Cyprus in the recent "bailins" of the banks there, and
the level of deposit insurance in the UK in 2007. In theory, in Cyprus the
way EU deposit insurance should have worked was as follows. Insured
depositors would share in the haircuts experienced by other depositors (and, as
it happens, bondholders), but then be compensated by the national deposit insurance
scheme. It doesn't really matter for our purposes whether the insured
depositor would be aware of being compensated - the issue isn't whether anyone
has to "claim back" after initially being out of pocket, or anything
like that. We can assume that the national deposit insurance scheme
seamlessly and instantly transfered the compensation into everyone's
account. Neither does it especially matter for our purposes whether the
national deposit insurance scheme is funded by other banks or by the government.

What does matter is this. In Cyprus "insured"
deposits weren't insured as such at all - partly because the Cypriot government
didn't have enough money to cover them. Instead, they were made
senior to other deposits, as per the British proposal for what should apply
across the EU. The consequence of that was that other depositors
experienced much larger haircuts than they would have experienced had the
insured depositors also taken a haircut and then been compensated - perhaps
twice as high a haircut.

So far so straightforward - that is obviously a consequence
of making insured deposits senior to uninsured deposits. But now grasp
this: the amount of the extra haircut experienced by the uninsured deposits
depended on the level of deposit insurance. If instead of being €100,000
the deposit insurance level were €50,000, uninsured deposits would have taken a
much smaller haircut, whereas if the insurance level were €200,000 the
uninsured deposits would have taken a much larger haircut.

Again, that's obvious, but it's crucial, because governments
change deposit insurance thresholds quickly and arbitrarily, as we can see by
considering the UK in 2007. Up to September 2007, only £2,000 of deposits
were 100% insured. That suddenly went to all deposits placed in any bank
after an arbitrary date, then settled back to £50,000 in October 2008, then
rose to £85,000 in 2010. If insured deposits were not preferential to
uninsured deposits, rises in the deposit insurance threshold would affect
only the insured depositors - making them better off. But if insured
deposits are preferential to uninsured deposits, then rises in the deposit
insurance threshold make uninsured depositors worse off. So you could
deposit £1 million in a bank believing the interest rate it offered you
provided a reasonable compensation for the risk of any plausible haircut you
might experience if the bank went bust, but then find that, because the
government raised the deposit insurance threshold, what had seemed like a fair
risk suddenly turns into a very bad deal, not because you have mis-assessed the
riskiness of the bank but instead because you were the victim of a regulatory
policy change.

That would be bad for the use of market forces to maintain
banking stability. It would mean that when a bank started to become
riskier, it could not compensate by attracting deposits by raising interest
rates, because large depositors would be concerned that the government would
respond to the bank's distress by raising deposit insurance thresholds after
the large deposit was made, confiscating funds ex post from uninsured
depositors. (And raising interest rates would make no difference to
insured depositors, since they would be insured anyway.)

It would be better not to insure the capital value of deposits
in fractional reserve banks at all. But if they are insured, and if we are
to have depositor preference, all depositors should rank
equally. Otherwise uninsured depositors become subject to confiscation of
funds through arbitrary (and plausible) regulatory decisions, which is not good
for healthy market processes in banking nor financial stability.

The Editor notes that just 19% of Conservative members think Cameron can win an overall majority, most think they are not respected by the party, and nearly half have ceased to engage in any party activity. That may seem unsurprising when the Conservatives have regularly been polling below or just above 30% in recent months. The latest ElectoralCalculus analysis predicts Conservatives on 227 seats (29.88% of the vote) at the next General Election, a 77% probability of a Labour majority, and a Labour majority of 74. When Cameron was elected, the Conservatives had been at around 32-34% in the opinion polls virtually continuously since 1992. He was supposed to break us out of that range. It appeared recently that he had finally managed - we started polling consistently well below the bottom end.

Yet the common wisdom amongst political commentators is that, despite these polls, when it comes to an actual General Election the Conservatives will do much better, and Labour rather worse, than current polls indicate. One reason for this is the general myth of the "mid-term blues", which I have attempted to debunk before - for the past 50 years in Britain, parties that were unpopular mid-term lost the next election, except for in the Thatcher period. But some commentators go further, such as Dan Hodges, who proclaims that "The next general election is now David Cameron's to lose". Hodges doesn't simply have a general view view about mid-term blues reversion. He has a very specific formula - Hodges Poll Rule: "Drop Ukip to 6%, give rest to Tories. Take LD up to 15%, take from Lab. That's the real poll result."

So, for example, the latest YouGov poll, last weekend for the Sunday Times, had Conservatives 33%, Labour 39%, Lib Dems 11%, UKIP 12%. Applying Hodges Poll Rule that converts to: Conservatives 39%, Labour 35%, Lib Dems 15%, UKIP 6% - which on a uniform swing would make the Conservatives the largest party on 305 seats.

The key assumption of Hodges and other commentators is that, come a General Election, most of Ukip's current poll support will switch to the Conservatives. I'm far from convinced, for a number of reasons. First, I see a key element of Ukip support as being a right-wing alternative to discouraged Labour voters in safe Labour seats. Left-wingers that didn't like Blair gave up voting. Right-wingers are less likely not to vote, but instead vote Ukip, achieving much the same result. The point of this is that, if Ukip didn't exist, I suspect that lots of its voters wouldn't be Conservative voters - they simply wouldn't vote at all or would vote for independents. And even if they don't vote Ukip come General Election day, that may well be because they just stay home.

Second, I think Ukip may be entering a phase in which it starts to pick up more left-wing support. Many continental nationalist movements pick up votes on both the discouraged right and the alienated left. Why shouldn't Ukip? It could be that, as an insightful Ukip-supporting contributor suggested at the recent Bow Group debate on Ukip-Conservative relations put it, right-wing support has just been the "low-hanging fruit", and that the future growth of Ukip support will come much more from the Left.

Third, I think many Westminster commentators assume that Ukip support is some form of protest by a mix of anti-Cameroons and anti-politics types - a kind of "politically correct BNP-in-suits". And they assume that protest is a mid-term luxury that will disappear when a real decision is to be made at a General Election. But that's far from obvious to me. I think it's much more likely that Ukip will prove to be an "SDP of the Right" - in at least the sense that its agenda (in its case on the EU and immigration) is adopted by the main two parties to such an extent that it loses its own raison d'etre. But, like the SDP, it could prove electorally significant for a couple of General Elections until the rest capitulate totally. I don't even think it is totally out of the question that Ukip could be the "Protectionists of the 21st Century". It is common to draw parallels between Conservative splits over Europe and the splits over the Corn Laws in the 19th century. What most folk forget, though, is that the Conservative Party died, then. The Peelites were the official Conservative Party - the Cameroons of their day, if you like - and under Gladstone they formed the Liberals. The "Protectionists" under Lord Derby and Disraeli were the schismatics - the Ukippers. It was the Protectionists that became the new voice of the right after the official Conservative Party died. We cannot just assume that Ukip will eventually "go away", unless it does so after eating us.

Many Conservatives are alive to the medium-term Ukip threat. Douglas Carswell, Daniel Hannan, and Toby Young are all signed-up advocates of a "Unite the Right" concept. At the Bow Group's Ukip-Conservative relations debate, we heard Carswell and Young putting forward their ideas. The problem I had with their schemes, though, was that they seemed little more than an appeal for Ukip to wind itself up and join us. It cannot work (indeed, it would be daft) to seek some form of pact with Ukip that meant we eliminated the distinction between ourselves and Ukip. That could not work both because there would be nothing in it for Ukip - why should it pursue its own immolation? - and because the Editor is right to fear that too close a pact would destroy the distinction between Ukip and Conservatives in the minds of voters. A further reason for rejecting Carswell's approach is that he believes the old established traditions of parties are obsolete and that the future lies in highly "retail" parties catering to the niche needs of citizen-consumers in a digital age. I believe that that would be a recipe for the death of two-party politics in general and the Conservative Party in particular, heralding the death of the entire British oligarchic governmental tradition, which the Conservative Party mainly exists to defend. That would be a catastophe for human civilisation in general, not simply for Britain. So suffice it to say, I'm agin it.

But I don't agree with either the Editor nor with Carswell and Young is in thinking that the right near-term goal of a pact with Ukip is the extinction of Ukip, nor its becoming an onging sister party to the Conservatives. Political pacts are usually arrangements of convenience, delivering short-term mutual advantage. We should not hope to make Ukip our sister, nor to hope to persuade it to wind itself up. If seek any kind of pact, it should have narrow and near-immediate purposes, providing advantage to both parties.

In the case of the form of pact I have proposed, the narrow near-term advantages that could be delivered to Ukip would be two-fold: representation at Westminster; and pressure on Labour to agree to a two-question in-out referendum. The narrow near-term advantages that could be delivered to the Conservatives would be: 2-3% of extra vote in 20-30 marginal seats. Immediately after a General Election, the pact would be at an end, and we would go our separate ways.

David Cameron has said there can be no pact with Ukip. Nigel Farage has said there can be no pact with David Cameron. Well, politicians change their minds or politicians change - that's the game. If the Conservatives look like getting 305 seats at the next General Election but could get an extra 20-30 seats by forming a short-term narrow pact with Ukip, and if Ukip believe they can force Miliband to promise an in-out referendum by forming a short-term narrow pact with the Conservatives, we should not allow personality issues to prevent us from doing the deal.

So here's the problem: the economy's picking up. That may not sound like a problem. That may sound like a long-hoped-for political gift. But it is – indeed it has the potential to destroy what remaining chance there is of David Cameron winning a May 2015 General Election. Let's see why.

There are distinct signs of life in the UK economy. It could have grown as much in the past two quarters as many economists predicted for the whole of 2013. Some monetary indicators are at their strongest levels since 2007, as we see below in this chart from Simon Ward of Henderson:

The point of this 2015-6 spending review was clearly to arrange, in more detail, Osborne’s hoped-for battleground for the 2015 General Election. He capped total welfare spending (excluding pensions) – will Labour match that? He ended automatic pay rises in the public sector – will Labour’s public sector union paymasters be willing to see that matched? He dipped the Lib Dems' hands firmly in the blood, complimenting Danny Alexander on how supportive he’d been in finding cuts. He tried to set up the notion that the welfare system has to be fair to those that pay as well as fair to those that receive.

What he didn’t say, however, was that this spending review is a reflection of the failure and abandonment of his 2010 deficit reduction plan. Conservative spokesmen regularly still refer to the “deficit being cut by one third”, but neglect to note that that is relative to 2009/10. More than half of that boasted “one third” reduction was achieved in 2010/11, largely by following Labour’s spending plans — the Coalition’s Spending Review wasn’t even published until October 2010. In the first year over which the Coalition had full budgetary control — 2011/12 — the budget was £120bn, and £120bn it has remained ever since. In Autumn Statement 2011 Osborne abandoned his plan of eliminating the structural current deficit over one Parliament, and since then there has been no progress on the deficit whatever, except via accounting wheezes involving Royal Mail and QE.

The original 2010 plan was based very heavily on growth – more than 60% of the deficit reduction forecast by this point was supposed to have come from growth. No growth; no deficit reduction.

Mercifully, we are now, at last, implementing spending cuts rather than talking about them whilst we raise taxes and (who’d a thunk it?) growth is picking up. But we now see the sinister hand of the inflation-predictor in fiscal policy. Welfare levels have nominally-frozen rises; the defence budget is frozen in nominal terms; the total welfare bill (excluding pensions cannot rise); the higher rate tax threshold has long since ceased to rise with inflation. The spin has been about how these nominal freezes might mean 1% or 2% real terms cuts per year — but that’s only true if inflation is just 2-3%. A nice dose of 8% inflation and all of a sudden the taxes are flowing and the welfare and defence budget have been slashed.

Growth is probably coming (absent banking sector meltdown in China, a further round of collapse in the Eurozone, the war in Syria spilling over and spiking oil prices, or a big bank going bust in Britain). When it comes, all will look happy for three or four quarters. And then the inflation will come. As Jeff Goldblum in Jurassic Park III might have said about the politics and fiscal consequences of all unsustainable inflationary growth: “Oh yeah, 'oooh, ahhh.' That's how it always starts. Then later there's running, and screaming.”

In a very simple tribal society, a number of political orders are feasible. It would be possible for the tribe's leader to make all key decisions herself. Alternatively, every key decision could be decided by a vote of all adults. But in a modern, complex society of vast numbers of individuals and huge numbers of challenges, only one system of government is feasible: oligarchy. The only way to run a modern society is to appoint a small minority of the population to specialise in understanding all the key questions around how the country should be governed, and to make decisions about them.

I am a big fan of military intervention. In general, I believe that military solutions to difficult situations are greatly under-rated and somewhat under-used. I was a fan of all Blair's interventions - from Sierra Leone through Kosovo to Afghanistan and Iraq. I would happily have supported interventions in other places as well, such as Zimbabwe or Iran.

But now, for the first time I can remember, there is a military conflict regarding which there is an apparent appetite for British involvement from significant parts of the Establishment and the media, but which I want to steer clear: namely Syria.

Why do I want to steer clear in this case when I didn't in others? For two basic reasons.

Here's reason (a): There are no Good Guys and not even any clear Worse Guys. I'm all for invading places to stop the innocent being oppressed, to prevent women being enslaved, to prevent incompetent leaders starving and impoverishing their populations so as to maintain their own vested positions. But if we were involved in Syria, whose side would we be on? Would it be that of the order-maintaining, Christian and Jew-defending secularist Alawites, despite their leader Bashar al-Assad having been responsible for the massacre of thousands of his own citizens? I'm guessing not - I assume we'll be against him, insisting he goes.

But then, who? Is it the Islamic fundamentalist group of the opposition, who would no sooner be in power but women would be oppressed, Christians driven out of the country, and the West openly mocked, perhaps with terrorist bases against us funded? Or would it be the score-settling group of the opposition, who would no sooner be in power but the Alawites would be subject to little less than genocide? Or are we just with the heart-eating opposition, whose blood-lust is up and who will long for war with their neighbours? Should the Syrian Kurds be able to join up with the Iraqi Kurds or would our involvement aim to crush their hopes? But if we didn't aim to crush their hopes, would our allies the Turks be with us or against us? If we aren't with any of the above, would we be hoping some corrupt figure in the fashion of Hamid Karzai would take over, fix an election or two with our help and the blood of our soldiers, then set about extorting whatever he could?

I haven't the foggiest idea what our political leaders' answers would be and, more importantly, neither do they.

Here's reason (b): We have no will to stay, occupy and enhance. In Bosnia, once the UN took over we appointed place-men to rule the country and turn it around, much as the Americans did in Japan after World War II. In Afghanistan we got nowhere with that, but at least we tried for a while before giving up and turning things over to Karzai. In Iraq, we did rather better with our occupation period, but we still took down the flag as soon as we arrived. If you are going to take somewhere over, you need to have the will to fix it before you leave. In the case of Syria, civil strife and blood feud will mean staying could be a matter of generations, not just decades a la Afghanistan.

A third, less important reason is that we have no clear self-interest. I don't think we always need a self-interest - usually we probably don't. But a self-interest could be enough to overcome the lack of good guys or the lack of will to stay.

Since we don't know whose side we are on, I would presume that any intervention would be aimed at some kind of peace-keeping - a futile attempt to keep the sides apart. But sadly, sometimes, war is the answer. It is only by testing our strength in battle that we can become persuaded of the value of later political engagement. If we just kept the sides apart, what of the fate of the Alawites and Christians and women in the rebel-controlled parts of the country? What of the fate of political dissidents in the Assad-controlled part? We have seen many parts of the world in which conflicts become frozen. It tends not to go well for the ordinary folk trapped on the wrong side of the border at the moment the West goes in - and not go well for decades.

What we should do in Syria is this: positively nothing. By that, I don't mean simply that we should send no arms ourselves and not invade or air strike ourselves. I mean we should declare, loudly and publicly, that we have no interest in involvement in Syria and will not stand in the way of any that do have an interest. If the Turks or Russians or Israelis or Lebanese or Cypriots want to supply arms or invade or do this or that, then good luck to them. We're going to watch.

In Syria, just for once - and I do not say this lightly or unaware of the awful consequences such a policy would have - we should mind our own business and let others mind theirs.

I've argued over the past year or so that the EU debate in the UK was rather behind the times, in that the real options we are likely to face aren't "renegotiate" vs "status quo" or "in" vs "out", but, rather, "out" vs "more out". It seems to me increasingly plausible that, far from hotting up, the UK's EU referendum debate will fizzle out, because by the time we actually have a referendum almost everyone serious in Britain will agree that we should leave. And that won't be because we'll all have changed out minds about the value of the EU. It will be because the EU itself has changed so much that there won't be any viable form of EU membership that does not involve being part of the Single European State.

To remind you, my argument for the "out" vs "more out" characterisation of the discussion has been as follows. In response to the Eurozone crisis, the EU is pressing ahead rapidly towards full political integration, in the form of an EU Federation. That is not some vague long-term aspiration. Earlier today President Hollande of France confirmed that France wants to see full political integration, including EU-level tax-raising, budgetary power and an elected President, by 2015.

It is common in the press and the political classes to characterize the poor opinion poll ratings for the Conservative (and Lib Dem) Party as "mid-term blues". The idea is that voters very often turn against governments in mid-term, but then return to the fold in the subsequent General Election.

Now that was, as we all know, true in the 1979-83, 1983-87 and 1987-92 Parliaments. However, there are some important features to note, here. First, Mrs Thatcher deliberately sought to do highly unpopular things early in her Parliaments, timing her policy initiatives so that their "vindication" would come ahead of the next Election. Then, the more vigorously her opponents had attacked her policies at the time, the more discredited they would be when those policies worked. That's not really relevant in this Parliament, as the Coalition has not sought to get its unpopular policies out of the way and complete early in the Parliament - quite the reverse; it scheduled most of its spending cuts for the second half of this Parliament and the spending cuts programme is not scheduled to be complete by the end - there is still scheduled to be one third of it to go at the end of the Parliament. Since the Coalition has not attempted an act-and-be-vindicated approach, there is little reason to expect a Thatcher-style mid-term unpopularity to convert into late-term popularity.

The 1987-92 Parliament was different. What happened then was that the mid-term unpopularity led to the leader being changed (to Major), whereupon there was a u-turn across a wide spectrum of policy: the poll tax was abandoned; a more "constructive" approach was adopted to the EU including a commitment to the ERM and signature of the Maastricht Treaty; public spending was increased very significantly. This change of personnel and policy did lead on to a victory in 1992. Whether it was the cause of that victory is of course disputed. But the fact remains that, unless the Conservative Party is planning to change its leader and change its stance on a wide range of policies, the 1987-1992 model of mid-term unpopularity leading to General Election victory seems inapplicable.

But what about other Parliaments? Well, mid-term unpopularity in 2005-2010 led to electoral defeat. What about 2001-2005? On ICM data, in the 2001-2005 Parliament the only time Blair was not clearly ahead in the polls was in September 2003, when in one rogue poll Labour, the Conservative and the Lib Dems were all level on 31%. On Ipsos-Mori data, in September 2003 Labour had a 9% lead. So in 2001-05, despite Iraq war protests and the like, there were no "mid-term blues" on opinion polls. What about 1997-2001? Again, on Labour was never behind in the polls from 1997-2001, except very briefly in September 2000 during the fuel protests. There were no "mid-term blues" for Blair.

OK, so what about earlier? Well, Labour lost in 1979, so poor mid-term poll ratings converted into defeat that Parliament. Heath lost in 1974, so again there was no recovery at the Election. Wilson lost in 1970. In 1966, two years into the 1964 Parliament, Wilson won a General Election - so no mid-tem blues there. The Conservatives lost in 1964, so no recovery from mid-term problems there, despite the change of leader to Douglas-Home.

Fifty years is probably enough to make my point. The notion of mid-term blues "usually" being reversed at General Elections just hasn't been born out for the past fifty years in British politics, aside from one case where changing leader and policy stance led to victory (Major in 1992) and two cases where the Party deliberately sought to pursue unpopular policies early on, seeking vindication later. If there is to be a recovery for the Conservative vote in 2015, based on a "reversal of mid-term blues" model, history suggests we'd better be either expecting our (incomplete) policies to be vindicated by then or to be changing policy stance and leader.